The number of wins of the single Shin Dong-bin… Entering the Lotte Bio Business

Lotte Group enters the bio market in partnership with bio-venture company NG Chem Life Sciences. It was the first to challenge the bio industry in 73 years since its establishment in 1948. In addition to the development of new drugs, it also presented a blueprint to intensively foster the consignment production (CMO) business.

According to the economies and the bio industry on the 22nd, Lotte Holdings is discussing a plan to become the second largest shareholder by acquiring a portion of its stake in NG Chem Life Sciences, a KOSDAQ listed company. NG Chem Life Sciences has an 18.96% stake in related parties such as Chairman Son Ki-young, the largest shareholder. It is known that Lotte will acquire shares by purchasing some of the shares owned by the largest shareholder or participating in a paid-in capital increase through allocation to a third party.

Lotte is also planning to establish a separate joint venture (JV) with NG Chem Life Sciences. The investment amount is expected to be at least 150 billion won, including joint ventures and equity acquisitions. The investment is handled by Lotte Holdings, a group control tower. The specific investment scale and timing will be decided before and after the general shareholders’ meeting to be held on the 26th. Lotte Chemical, a chemical affiliate, will also participate as an equity investor.

Lee Seung-gyu, vice chairman of the Bio Association, predicted, “It is highly likely to follow the precedent of Samsung Biologics, which started as a CMO business and is expanding its scope.”

In the industry, it is believed that the success of Samsung and SK, which entered the bio field first, was a stimulus. The two subsidiaries, Samsung Biologics, SK Bioscience, and SK Farmteco, have grown into leading companies in the industry with their manufacturing know-how and bold investments accumulated in the semiconductor and chemical fields.

NG Chem Life Sciences is a new drug development company established in 1999. EC-18, a new drug that chemically synthesizes the ingredients contained in antlers, is being developed. This substance is undergoing phase 2 clinical trials in the United States as a treatment for COVID-19, neutropenia, and oral mucositis. In addition, a factory that produces APIs is also in operation, so it is analyzed that Lotte is the best partner to enter the CMO business.

‘The number of wins and losses’ to join hands with bio ventures
To grow new drug and CMO business at the same time

“What are you saying is different from last year?”

This is what the presidents of Lotte Group affiliates are most afraid of these days. “It is close to the boulevard that this remark came from the mouth of Lotte Group chairman Shin Dong-bin,” explained a Lotte Holdings official. In particular, the movement of change accelerated as Chairman Shin ordered him to find new food through bold investment at the president’s meeting on January 13th. It is from this background that the Lotte Group has challenged the bio industry.

Join the venture and jump into the bio

The first time the Lotte Group considered entering the bio industry was in October last year. This is after Chairman Shin asked the presidents of each subsidiary to “make a new mid- to long-term plan to lead Lotte’s 10-year growth.” “The two-headed car, Lotte Shopping, and Lotte Chemical received a report card for the first half of the year at the level of’Shock’, and there was a sense of crisis,” said a representative of Lotte Holdings. In the first half of last year, Lotte Shopping only posted 8,122.6 billion won in sales and 53.5 billion won in operating profit. Compared to the same period of the previous year, they decreased by 8.8% and 82.0%, respectively. In the end, last year’s operating profit remained at 3461 billion won, a 19.1% decrease from the previous year. Lotte Chemical, the two wings of the group, also saw a decrease in sales (12,23 trillion won) and operating profit (356.9 billion won) last year by 19.1% and 67.7%, respectively.

To overcome the crisis, Lotte Holdings, the group’s control tower, has signed a contract with a global consulting company since the second half of last year and has been seeking various ways to advance into new business. Lotte believes that the bio business can compensate for the weaknesses of its economic-sensitive distribution and chemical-focused portfolio. Lee Seung-gyu, vice chairman of the Korea Bio Association, said, “Bio is a field that is less sensitive to the economy and has a high potential for future growth. Even if you do not have a high level of expertise in the field, you can create synergy by combining strong capital power and production know-how in the chemical business.”

Stimulated by the success stories of Samsung and SK

Since 2015, the domestic bio industry has reached its heyday with Hanmi Pharmaceutical’s successive technology exports. The bio business, which Samsung, LG, and SK, have been cultivating as a new business for a long time has begun to see light. Samsung Biologics has grown to become the world’s largest biopharmaceutical consignment manufacturing (CMO) company, and SK Biopharm has entered the global market with new drug licenses in the US and Europe. SK Bioscience has emerged as the’Cinderella’ of the global bio industry by winning the consignment production of the corona vaccine from AstraZeneca NovaVax and others. Samsung Biologics and SK Bioscience have quickly become the leading players in the global market by grafting manufacturing know-how accumulated in the semiconductor and chemical fields.

The Lotte Group, which does not have a bio-pharmaceutical affiliate, was forced to see them with envy. The Lotte Group had Lotte Pharmaceutical, which produces health functional foods, but it missed the opportunity to enter the pharmaceutical and bio sectors in earnest when it merged with Lotte Confectionery in 2011.

It is analyzed that the success of SK Group’s success in recovering investments through listing of its bio-affiliated companies would have been a stimulus to Lotte Group. The market capitalization of SK Bioscience and SK Biopharm, which were listed on the 18th and last July, totaled 19,238.9 billion won. This is similar to the total market capitalization of nine listed affiliates of the Lotte Group, including Lotte Chemical.

The reason for choosing NG Chem

The reason why Lotte Group chose NG Chem Life Sciences as a bio venture partner in the bio business is because it believes that it can simultaneously develop new drugs and conduct CMO business. NG Chem Life Sciences is developing a new drug candidate (EC-18) developed by chemically synthesizing an ingredient extracted from antler. The company explained that it is expected not only as an anticancer drug, but also as a treatment for non-alcoholic steatohepatitis (NASH), oral mucositis, and Corona 19. The candidates undergoing phase 2 clinical trials with approval from the U.S. Food and Drug Administration (FDA) are four types, including the treatment for novel coronavirus infection (Corona 19). It has its own factory here and is also engaged in the drug substance CMO business. It is producing 40 kinds of drug substances, such as contrast agents and anticoagulants.

An official in the bio industry said, “There are few bio companies that are doing both new drug development and CMO business at the same time,” and said, “It seems that NG Chem Life Science, which has established a foundation for a long time in both fields, was chosen as the right person.”

Reporter Kim Woo-seop/Park Dong-hui [email protected]